Venezuela seizes General Motors plant as country’s crisis escalates – USA TODAY
The country continues to face major political unrest and economic woes.
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Venezuelan authorities suddenly seized the General Motors plant there, the company confirmed late Wednesday, in a move that broadens the international implications of the country’s political and economic decomposition.
The development puts an abrupt end to GM’s operations in the country, which the world’s third largest automaker described as an “illegal judicial seizure of its assets.”
It also comes as the South American nation experiences intense public protests against the government of President Nicolas Maduro. Three people were killed late Wednesday as tens of thousands of Venezuelans took to the streets to demand fresh presidential elections and the release of jailed opposition politicians.
The country has high crime and inflation rates and there are shortages of many basic goods and services. It is oil-rich but cash-poor. Maduro has used his Socialist government’s institutions to pursue political opponents.
Relations with the U.S. have been tense in recent years, although Maduro’s anti-American rhetoric has softened since President Trump took office. Venezuela’s Information Ministry was not immediately available for comment.
“We are concerned that the government of Maduro is violating its own constitution and is not allowing the opposition to have their voices heard, nor allowing them to organize in a way that expresses the views of the Venezuelan people,” U.S. Secretary of State Rex Tillerson told reporters Wednesday, before the GM episode came to light.
The fate of other automotive plants in Venezuela was not immediately clear. Ford’s plant in Venezuela had already been shut down due to lack of demand but the company remains in possession of the facility, spokeswoman Kelli Felker said Thursday in an email.
Toyota’s “operations in Venezuela are currently operating normally,” spokesman Scott Vazin said Thursday in an email. “Our team members, dealers and customers remain our top priorities, and we are monitoring the situation closely.”
A Fiat Chrysler spokeswoman could not immediately comment Thursday.
GM said in a statement that vehicles and other assets had been taken from its facilities. The Detroit-based company did not provide details about how the seizure unfolded and did not respond to questions about whether the disruption would affect sales of certain vehicles.
The automaker said it would “vigorously take all legal actions, within and outside of Venezuela, to defend its rights.”
But its legal recourse against the Venezuelan government is likely limited, said Peter Quinter, Miami-based chair of law firm GrayRobinson’s Customs and International Trade Law Group.
“They can go to the courts here in the United States and try to seek action. But that really is not going to be effective unless the Venezuelan government has some assets here” that could be seized as compensation, Quinter said. “I don’t see that happening.”
The troubled Venezuelan economy has dragged down the auto industry for several years, as tanking sales and abysmal currency exchange rates have undermined earnings reports.
Consequently, investors were not shaken by the plant’s demise. GM shares rose 0.6% to $33.98 shortly after the opening bell Thursday.
“Any lost production is unlikely to prove material,” Evercore ISI analyst Arndt Ellinghorst said in a note to investors, adding that the “day may have arrived” where the plant is unsalvageable.
The Venezuelan government has previously seized assets belonging to U.S. companies including those of cleaning products maker Clorox in 2014. Clorox subsequently exited the Venezuelan market.
“I would suspect GM is not the first and they’re not going to be the last because the government of Venezuela is desperate for any assets they can take,” Quinter said. “It really is a vicious cycle they’re in.”
General Motors Venezolana, GM’s local subsidiary, was established in 1948 and employs about 2,700 workers and has 79 dealers in the country. The firm said it would make “separation payments” to affected workers.
GM representatives did not respond to questions about whether the company had contacted the Trump administration for help.
“The company is confident that justice will eventually be served, and looks forward to continue leading the Venezuelan market.
In the meantime, GMV, through its dealers, will continue to provide aftermarket service and parts for its customers.”
Contributing: Brent Snavely of the Detroit Free Press.